Articles Tagged with“Florida sales tax”

You have a business that sells goods to your customers in other states. Recently, you heard that you should have collected sales tax on certain transactions or that the money you collected as sales tax should have been remitted to that state. You suspect that if you contact the state directly about your issue, the state may decide to audit you or bring you to jail for not remitting the taxes you collected. What do you do? What can give you peace of mind?

In comes the Voluntary Disclosure Program. With the Voluntary Disclosure Program, you pay the state its tax and interest, have most or all penalties waived, and most importantly, you avoid going to jail. At the end of the day, the Voluntary Disclosure Program truly is the best solution to some of the worst tax problems. But what is the Voluntary Disclosure Program and how do you qualify?

The Voluntary Disclosure Program is the process of initiating contact with a state to come clean on potential tax liabilities. To qualify for the Voluntary Disclosure Program, you cannot have been contacted by the state. If you have been contacted by the state before you apply for the program, most states recognize this contact as disqualifying you from the Voluntary Disclosure Program. However, some states may nevertheless allow you to enter the Voluntary Disclosure Program. The moral here is that as soon as you discover a tax liability that you wish to disclose, you need to enter the Voluntary Disclosure Program immediately.

Earlier in 2017, Premier Netcomm Solutions LLC (“Premier”) lost on reconsideration in New Jersey tax court. The case dealt with the taxability of software as a service (“SaaS”) dating back to an audit from 2004 through 2005. After initially beating for state, the court overturned a prior decision on reconsideration, which ultimately upheld New Jersey’s tax assessment.

Premier seems to be a classic IT provider in that it provides services such as network supports, internet access, consulting and design of IT and telephone projects, trouble shooting, remote training, data back-up, and network monitoring for businesses. In the original decision, the court sided with Premier that its sales were not subject to sales tax. The court concluded that prior to 2005, sales of services related to prewritten software were not taxable. In so doing the court invalidated New Jerseys tax assessment against Premier.

Unhappy with the decision, New Jersey’s Division of Taxation sought reconsideration, which is very difficult to prevail on. The Court seemed to grant reconsideration because the original case erred fundamentally on its analysis. Primarily, the court originally believed the law did not tax such services until its 2005 amendment. However, the amendment was really based on New Jersey’s membership into the Streamline Sales and Use Tax Agreement (“SSUTA”) in 2005, which required it to adopt a uniform definition. Therefore, based on a 2004 Bulletin, the court reconsidered the case and ruled that the services were and have been subject to tax since 2004.

Over the past several years software as a service (“SaaS”) has been a booming industry. Pioneers in the cloud computing industry, like Salesforce, have developed web based applications that offer a wide range of services to the user. Driven by competitors such as Microsoft, Adobe, Sap, ADP, Oracle, IBM, Intuit and Google, the SaaS industry has become a $204 billion industry and grown by more than 16% last year.

Traditionally, from a sales tax perspective, states tax the sale of tangible personal property but not services. While many states adhere to that mantra, several states have moved towards taxing software despite being intangible in nature. Still, it can be difficult to determine whether SaaS is more like a software, which may be taxable, or if it feels more like a service provided, which is not taxable in many states.

States have been consistently inconsistent across the country in determining whether to tax SaaS. States often have similar statutes and reach completely different conclusions in their quest to analyze SaaS. Further, many situations occur in which a state can treat two seemingly similar SaaS companies differently within their own state. In an attempt to comply, companies often struggle with charging the appropriate sales tax in the correct state and/or their state income tax obligations, with respect to SaaS.

State and local governments are continually searching for ways to increase revenue through taxation of online companies conducting business within their state or county. One such way is by assessing a rental tax against online travel companies (“OTCs”).

OTCs typically facilitate the rental of a hotel room for vacationers and charge a fee for their services. OTCs play a significant role in the hotel rental business by providing consumers with a variety of choices based on price, location, and other factors. OTCs also provide benefits to hotels through promotion and advertising, and providing the ability for vacationers to rent a room at a lower price. Further, OTCs increase hotel occupancy rates and promote tourism thereby creating revenue for state and counties.Continue reading

Few understand or even bring up sales tax issues when they order pizza. The next time you order pizza, take a look at the receipt and see if the pizza shop charges you for the delivery. Taking it a step further, what happens if you purchase an item and pay for shipping charges? Is tax due on just the item, or is it also due on the delivery charge as well? The answer depends largely on whether the delivery charge is separately stated and if it is optional. This issue will be in center stage for a recent class action filed in Broward County against Pizza Hut.

Lauren Minniti, the class representative, purchased a pizza from Pizza Hut and had it delivered. Pizza Hut allegedly charged her tax based on the charge for the pizza and for the separately stated delivery fee instead of tax on the pizza alone. Was this correct?Continue reading

With the every-so-exciting Florida Sales Tax Holiday (“Holiday”) running August 7th through August 16th, all Floridians must become knowledgeable so that we can maximize our savings as buyers. The Holiday does not solely apply to Parents and Students looking for their essential pencil sharpeners, the Holiday applies to all sales throughout Florida–so thrilling! Just think about all the wonderful school supplies you could stock up your office drawers this upcoming week. Like everything that seems too good to be true, this 10 day Holiday has a few rules that must be discussed. The following are the limitations for the Holiday:

• Clothing selling for $100 or less per item;
• Footwear selling for $100 or less per item;
• Certain Clothing Accessories selling for $100 or less per item;
• Certain School Supplies selling for $15 or less per item (Note – This does not include books); and
• Personal Computers and Certain Computer-Related Accessories on the first $750 of the sales price, when purchased for noncommercial home or personal use.Continue reading

As the internet becomes essential to our everyday lives, states are consistently inconsistent in their attempt to tax cloud computing systems. Cloud computing is “the practice of using a network of remote servers hosted on the Internet to store, manage, and process data, rather than a local server or a personal computer.” Essentially, the term “Cloud” is a metaphor for the internet. Cloud computing allows the user to access data over the internet without storing data on a hard drive. In fact, most internet users rely on these cloud computing systems as an essential tool in their everyday lives.

How should a cloud computing provider determine whether their object is subject to sales tax? A simple two-part test may allow a cloud computing provider a proper vantage point on whether they are subject to sales tax. First, apply a test. Second, ask whether the product is a software or a service? Think of this test as a simple flow chart.Continue reading

In just another case where the Department of Business and Profession Regulation (“DBPR”) attempts to be larger than the law, a Recommended Order was issued on May 29th, 2015, stopping DBPR in its tracks. In Thompson Cigars, Case No: 14-3471, Judge Alexander agreed with the taxpayer, that DBPR’s inspection authority is not as broad as it thought it was. However shocking it may be to DBPR, Judge Alexander agreed with the taxpayer on both counts raised in this case. The Administrative Complaint, filed by DBPR, alleges that Thompson Cigars, Respondent: (a) failed to produce records of tobacco products sold to persons or business entities in the State of Idaho, and (b) failed to submit a sworn application reflecting that two individuals, not previously disclosed, had a direct or indirect financial interest in the business.Continue reading

Over the past few years, we have been intricately involved in ongoing litigation with the Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco (“ABT”). There still remains ongoing litigation in connection with the Micjo issue. Micjo dealt with whether non-tobacco charges, such as federal excise tax and shipping charges, are subject to Florida Other Tobacco Products Tax and the Surcharge on Other Tobacco Products (“OTP Tax”). Down another path there is current litigation in Brandy’s, which deals with cigar wraps, or blunt wraps, which are subject to Florida’s OTP Tax. Recently, however, another case was filed in late 2014 that has a far broader reach than any other case filed to date.Continue reading

It never ceases to amaze me, the wide variety of companies that state agencies attempt to extort money from. I mean, how could a portable toilet company possibly have a sales tax problem? Most states impose a sales tax on the sale or rental of tangible personal property, but do not tax services. From the perspective of a toilet industry, if a venue rents a toilet, it is clearly a rental of tangible personal property subject to tax. If the same venue pays a fee to clean the toilets, then it sounds like a nontaxable service. But what happens when the venue rents the toilet and purchases the cleaning service along with it? In this part tangible personal property rental, part service transaction (known to the sales and use tax attorney as a “mixed transaction”), is only part of the transaction taxable or is the entire charge subject to sales tax? Many states take the incredibly helpful “it depends” approach, and look to an even more helpful “object of the transaction” test. In reality, it truly seems like state agencies and courts reach a conclusion first and fill in the reasons later.Continue reading